- GBP/USD saw dip-buying trades as softer US CPI revived Federal Reserve doves.
- Focus shifts to United Kingdom top-tier data for extension of the GBP/USD rally.
- GBP/USD confirmed a bull flag, opening the door for a test of 1.2900 and beyond.
Buying interest around GBP/USD remained unabatedas the Pound Sterling booked its fifth weekly gainagainst the beleaguered United States Dollar (USD). US Federal Reserve (Fed) doves are back in town after softer US Consumer Price Index (CPI) data. Will Bank of England (BoE) doves snatch the spot on the UK inflation data?
GBP/USD: What happened last week?
After opening the week on a negative note, the tide turned in favor of Pound Sterling bulls, as the narrative that cooling United States inflation data could prompt the Federal Reserve to end its tightening cycle and cut rates by the end of this year, exacerbating the pain in the US Dollar.
Starting out the week, the US Dollar stood tall, as Good Friday’s strong US labor market report provided the much-needed zest to the ongoing recovery momentum. The United States economy added 236,000 jobs in March, almost in line with the 240K figure expected. The Unemployment Rate fell to 3.5% last month, from 3.6% in February, even as the labor force grew by about half a million people and the participation rate rose slightly. Average hourly wages rose 0.3%, slightly faster than the month before. Solid US jobs data ramped hawkish Fed rate hike bets, with markets pricing about a 66% probability of a 25 bps rate hike next month vs. a 52% chance seen ahead of the data release.
However, heading into the weekly closing, markets began to price in rate cuts by the Federal Reserve as early September after delivering a 25 bps rate in May and pausing in June. The revival of the dovish Federal Reserve interest rates outlook smashed the US Dollar to a one-year low against a basket of currencies, with the US Dollar Index staying vulnerable on the 100.00 level. In response, the GBP/USD pair extended its winning momentum beyond 1.2525, refreshing ten-month highs.
What led to the massive U-turn in the market’s expectations of the Federal Reserve rates outlook? It definitely had to be the most important event risk of the week – the US Consumer Price Index data. Following the recent series of discouraging US activity numbers, the United States Bureau of Labor Statistics (BLS) released the Consumer Price Index data for March on Wednesday, showing an annualinflation rate of 5.0%, while the month-on-month CPI rise was 0.1% in March. The all-items index increased 5.0% for the 12 months ending March, registering the smallest 12-month increase since the period ending May 2021. The housing component came in at 0.6% vs 0.8% last month. Shelter accounts for 34.7% of CPI inflation.
Meanwhile, on Thursday, US Producer Price Index (PPI) continued its downward slide in March, with annualized price variationsinking dramatically by 2.7% from an upwardly revised 4.9%. It was the lowest annual level for the key inflation gauge since January 2021. Signs of softening price pressures broadly continued to accentuate the downside in the US Dollar.
On the UK side of the story, Pound Sterling buyers largely ignored the top-tier statistics, which showed that the UK economy unexpectedly stalled in February, with the country facing more strikes as a cost-of-living crisis erodes the value of wages, the official data showed Thursday. The zero-growth performance followed a 0.4% expansion in January. The UK Treasury and the Bank of England said they expect the country to dodge a recession this year even as UK inflation remains above 10.0%, lending some support to the British Pound.
The data from the US revealed on Friday that Retail Sales contracted by 1% on a monthly basis in March, compared to the market expectation for a decrease of 0.4%. The Fed reported a 0.4% growth in Industrial Production in March. In the meantime, Federal Reserve Governor Christopher Waller said that the monetary policy will need to remain tight for a substantial period and “longer than markets anticipate.” The comments helped the USD erase some of its weekly losses and caused GBP/USD to decline below 1.2500. Ahead of the weekend, the University of Michigan said that the Consumer Confidence Index improved slightly to 63.5 in early April from 62 in March. More importantly, the year-ahead inflation expectation component of the survey rose to 4.6% from 3.6%.
United Kingdom Consumer Price Index next on tap
After a critical week for the United States calendar, it’s the turn on the other side of the Atlantic, keeping GBP/USD traders on their toes. Monday seems to be fairly quiet in absence of any top-tier US and UK economic data releases.
The United Kingdom labor market report will stand out on Tuesday, following the publication of China’s Gross Domestic Product (GDP) and activity numbers. Chinese data tends to have a significant impact on risk sentiment, in turn affecting the high-beta Pound Sterling. From the US docket, traders will see the mid-tier Housing Starts and Building Permits data on Tuesday.
The UK Consumer Price Index (CPI) data will hold the key on Wednesday amidst the release of the Bank of England’s (BoE) Quarterly Bulletin. Meanwhile, traders will await the Beige Book in American trading.
Thursday is devoid of any data release from the UK, and therefore, the focus will be on the United States weekly Jobless Claims, Philly Fed Manufacturing gauge and the Existing Home Sales data.
GBP/USD will brace for an action-packed Friday, with the S&P Global Preliminary PMIs due from both sides of the Atlantic. The Retail Sales from the United Kingdom will also be closely eyed.
As the Federal Reserve and Bank of England remain data-dependent, speeches from the respective central banks’ policymakers will be closely scrutinized for future policy paths.
GBP/USD: Technical outlook
The previous week’s correction from ten-month highs of 1.2525 extended on Monday, as the GBP/USD pair tumbled to test immediate support, then at the 1.2350 psychological level.
The bearish crossover, represented by the bullish 100-Daily Moving Average (DMA) piercing through the flattish 50 DMA from below, did come into play and weighed on the GBP/USD pair in the early part of the last week.
Pound Sterling bulls, however, managed to defend the latter, which helped stage a solid comeback in GBP/USD back to the 1.2500 barrier. It was the bull flag breakout confirmed on Tuesday that shifted the course back in favor of GBP/USD buyers.
In the week ahead, GBP/USD buyers need to find acceptance above the 1.2600 level to resume the upward momentum toward the May 27 2022high of 1.2669. Next on bulls’ radars is the static resistance at 1.2700, above which a fresh uptrend toward the bull flag measured target at 1.2934 could be in the offing.
So long as the 14-day Relative Strength Index (RSI) holds comfortably above the midline, the bullish potential is likely to remain intact.
On the flip side, the weekly low and the critical support near 1.2350 need to give way for GBP/USD sellers to regain control. At that level, the upward-pointing 21 DMA continues to hang around.
The next relevant downside target is seen at the 1.2300 round figure, below which a fresh downswing toward 1.2175 cannot be ruled out. The 100and 50 DMAs coincide in that demand area.
GBP/USD daily chart
GBP/USD: Forecast poll
A majority of experts polled by FXStreet expect GBP/USD to remain bullish in the near term. The one-week average target is located at 1.2500. There is a bearish tilt over the one-month view, and the one-quarter view paints a mixed picture.
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FAQs
What is the GBP USD forecast this week? ›
GBP/USD Weekly Outlook
Initial bias remains neutral this week for consolidations. Outlook will remain bullish as long as 1.2343 support holds. Above 1.2545 will target 1.2759 fibonacci level first. Firm break there will target 61.8% projection of 1.0351 to 1.2445 from 1.1801 at 1.3095.
GBP/USD Week Ahead Forecast: Eyeing 2023 Highs Around 1.25 Amid Fresh Oil Rally.
What is the Gbpusd forecast for 2023? ›GBP/USD is forecast to reach 1.20 in March 2023, before falling to 1.18 in June 2023, to 1.16 in September 2023 and to 1.15 in December 2023. EUR/USD is predicted to reach 1.10 in March 2023, before declining to 1.08 September 2023 and holding at 1.08 in December 2023.
Why is GBP USD crashing? ›The Pound US Dollar (GBP/USD) exchange rate is crashing on elevated interest rate hikes from the Federal Reserve.
Is GBP expected to rise or fall? ›We are bullish on the broader outlook for the GBP above the 1.14 level and expect firm support on dips to the low/mid 1.14 area from here. Intraday gains through 1.1610 should cue renewed GBP gains.”
Is GBP getting stronger against USD? ›GBP/USD is rising again as global equity markets recover with a push to 1.25 being possible if Thursday's U.S. GDP reading disappoints.
What is the future of GBP rate? ›For today i.e. May 01st, Mon 2023, 1 British Pound is equal to 102.8647 Indian Rupees. Today's expected low - high GBP to INR forecast rates is INR 102.6616 - 102.8647. respectively. Change in GBP to INR rate from previous day is +0.2%.
What is the all time high for GBP USD? ›Highest: 1.2418 USD on 14 Dec 2022. Average: 1.1961 USD over this period. Lowest: 1.0984 USD on 11 Oct 2022.
What is the most stable currency 2023? ›| Rank | Currency (Currency code) | Exchange rate |
|---|---|---|
| 1 | Kuwaiti dinar (KWD) | 1 KWD = 3.26 USD |
| 2 | Bahraini Dinar (BHD) | 1 BHD = 2.65 USD |
| 3 | Omani rial (OMR) | 1 OMR = 2.60 USD |
| 4 | Jordanian dinar (JOD) | 1 JOD = 1.41 USD |
Will the dollar get stronger in 2023? ›
The dollar index is up over 1% for 2023 largely because of stronger-than-expected U.S. economic data and a corresponding change to expectations of interest rate hikes by the U.S. central bank.
Is the GBP USD a buy or sell? ›| Composite Indicator | Signal | |
|---|---|---|
| 150 Day Moving Average | Buy | |
| 200 Day Moving Average | Buy | |
| 100 - 200 Day MACD Oscillator | Buy | |
| 100 - Day Average Volume: 323,058 | Average: 100% Buy | |
Current trends do not look promising," says Sharma. "Connecting the dots... we see little prospect for a sustained recovery in GBP through 2023, which may turn out to be a holding pattern year," he adds.
Will the GBP weaken? ›The OECD has forecast the UK economy to shrink by 0.4% in 2023. In contrast, the US is expected to grow in 2023 by 1.8%. Based on that, you would expect the GBP/USD rate to remain weak.
What is the strongest currency in the world? ›Kuwaiti dinar (KWD)
The Kuwaiti dinar is the strongest currency in the world with 1 Kuwaiti dinar buying 3.26 US dollars (or, put another way, US$1 equals 0.31 Kuwaiti dinars). Kuwait is located between Saudi Arabia and Iraq, earning much of its wealth from being a leading global exporter of oil.
If you are looking for Forex pairs with good return, GBPTRY can be a profitable investment option. GBP/TRY rate equal to 24.446 at 2023-04-28 (today's range: 24.219 - 24.471). Based on our forecasts, a long-term increase is expected, the Forex rate prognosis for 2028-04-21 is 51.674.
What currency is strongest against the pound? ›The highest currency in the world is none other than Kuwaiti Dinar or KWD. Initially, one Kuwaiti dinar was worth one pound sterling when the Kuwaiti dinar was introduced in 1960. The currency code for Dinars is KWD. The most popular Kuwait Dinar exchange rate is the INR to KWD rate.
What is the GBP CHF forecast for 2023? ›The survey participants see the USD/CHF exchange rate at 0.98 at the end of 2023. The companies surveyed forecast an exchange rate of 1.10 for the GBP/CHF currency pair.
What will GBP USD be long term 2025? ›What price will GBP/USD be in 2025? This currency pair is expected to trade at 1.3500 by 2025.
Will the Pound get stronger in 2023? ›According to Trading Economics global macro models and analysts' expectations. the British Pound is forecast to trade at 1.18 by the end of Q1 2023. Looking forward, the website estimates GBP/USD to trade at 1.11 in 12 months' time. Another AI-based website, LongForecast, estimates GBP/USD to close in 2023 around 1.13.
What year was the Pound strongest against the dollar? ›
The Pound to Dollar rate reached a high of $2.649 on 6th Mar 1972. That remains the strongest the Pound has been against USD since it freely floated in 1971. Prior to the 1970s, the Pound to Dollar rate was fixed at a level set by the British government.
What is the safest currency in the world? ›The Swiss franc is the official legal tender of Switzerland and its tiny neighbor Liechtenstein, and the currency is seen as a safe haven due to Switzerland's political stability. The Swiss franc was introduced in 1850 and was later briefly pegged to the euro before moving to a free-float.
Which is the strongest currency in the world in future? ›The Kuwaiti dinar is the strongest currency in the world with 1 Kuwaiti dinar buying 3.26 U.S. dollars (or, put another way, US$1 equals 0.31 Kuwaiti dinars). Kuwait is located between Saudi Arabia and Iraq, earning much of its wealth from being a leading global exporter of oil.
Where does the American dollar go the furthest? ›Mexico. One of the best travel deals out there for U.S. travelers is its nearest neighbor to the south: Mexico. With roughly 21 pesos to the US dollar (as of Mar. 8, 2022), it's easy to see why so many Americans visit the country every year.
What is the world's oldest currency still in use? ›The British pound is the world's oldest currency still in use at around 1,200 years old. Dating back to Anglo-Saxon times, the pound has gone through many changes before evolving into the currency we recognise today. The British pound is both the oldest and one of the most traded currencies in the world.
Which currency will be strongest in 2050? ›China's yuan could become world's 'currency of choice' by 2050 under dual circulation plan | South China Morning Post.
Which country has the weakest currency in the world? ›The Iranian Rial is the least valued currency in the world. It is the lowest currency to USD. For the simplification of calculations, Iranians regularly use the term 'Toman'. 1 Toman equals 10 Rials.
What happens if the U.S. dollar collapses? ›(1) the cost to import goods will skyrocket because foreign companies will no longer want dollars; (2) our government will lose its ability to borrow at its current levels – forcing it to raise taxes or print money to cover its shortfalls; (3) inflation will be at levels we have never seen because of higher import- ...
Who benefits from a weak dollar? ›Advantages and disadvantages of a weak dollar
A weak dollar can be a good thing for U.S. firms who want to sell goods in foreign markets. Because foreign products and services become relatively more expensive, U.S. products and services become more competitive overseas.
The U.S. dollar advanced by nearly 50% against a broad range of currencies from its 2011 low to its recent peak in September 2022.
When to sell GBP USD? ›
The best time for trading GBP/USD is when both UK and US markets are open for trading. This is from 8:00 AM to 10:00 AM GMT and from 12:00 pm TO 15:00 PM GMT. This is when the greatest market moves occur and when spreads are at their lowest.
Is the British pound more stable than the dollar? ›Although the British pound is worth more than the U.S. dollar on a nominal basis, the dollar is still a stronger currency due to its status as the world's reserve currency and its greater volume of trading in the forex markets.
When should I buy GBP? ›Most monthly economic data from the United Kingdom comes out between 2 a.m. and 4:30 a.m. Eastern Time in the United States, making this a good time for trading. Central bank interest rate announcements, which usually take place at regularly scheduled times, also have a powerful influence on exchange rates.
What is the Pound rate forecast? ›At the end of the month, the rate is expected to close around 92.57. In December 2022, the GBP to INR rate is expected to open around 92.57, with a minimum of 89.70 and a maximum of 95.28.
Is the Pound getting weaker against the dollar? ›Since hitting a low in September 2022, the GBP/USD rate has partially recovered. The good news is inflation seems to have peaked both in the UK and US. As a result, investors are unwinding their strong US Dollar bias. Going forward, a lot will depend on the economic outlook for 2023.
What is the highest pound rate till now? ›- Highest: 102.44 INR on 14 Dec 2022.
- Average: 97.914 INR over this period.
- Lowest: 88.437 INR on 28 Sep 2022.